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In January, TD economists expected Canadian housing prices to slow in 2014, but they’ve since revised their prediction according to a new report.

Contrary to their initial forecast, five-year mortgage rates sit at their lowest level on record and housing affordability (particularly with respect to condos) remains stable.

Thanks to low interest rates and increased demand, TD expects prices for existing homes to increase by five to six per cent by the end of 2014. However, the report predicts prices will cool over the medium term, which could mean the beginning of next year.

“The Canadian housing market is still estimated to be moderately overpriced and overbuilt, the consequences of which will likely be felt beginning in 2015, reflecting the impact of gradually rising interest rates,” said TD economist Diana Petramala, author of the report.

The Canadian condo market is already starting to feel the effects of overbuilding. Condo resale listings have doubled in many urban cities and a high number of newly-built condo units sit unoccupied.

With increased unit supply, higher interest rates and reduced affordability, the Canadian housing market looks to be headed for a soft landing. Condo prices are expected to fall by two per cent in 2015.

“Softer housing demand, combined with rising listings, will likely push the Canadian housing market towards a buyer’s market over the next year and a half,” said Petramala. “As homebuyers have more choice, they will also have more bargaining power and price pressure will ease.”

However, the single-family home market tells a different tale. The price difference when compared with a condo has widened to about $200,000. Prices for single-family units are also expected to rise by two per cent next year.

Markets east of Toronto have already undergone a soft landing while Vancouver, Toronto and Victoria will experience a more vulnerable cool-down period. Calgary and Edmonton are seen as the strongest, as both markets are expected to have the fastest price growth over the next few years.

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